Popular Salon South of Denver
Long-tenured stylists working in a custom-designed salon!
Located just south of Denver, this popular salon has sixteen stylists to cut, color, and dry customers’ hair into coiffed perfection. Known for their color expertise in creating natural shiny grey coverage colors to the fun rainbow of new hair colors.”, this highly popular business has excellent reviews on social media and a loyal client base of over 2,000 clients. In the past few years, this company has transitioned to a booth renting operational format, reducing the number of W2 employees as well as overhead employee expenses. Over time, the owner has hired and trained an exceptional staff. The owner has been able, as a result of transitioning greater responsibility to the staff, to assume an oversight only role.
Customers are welcomed to this salon with a beautiful reception area complete with updated shelving for retail product sales. The custom-designed location offers many work stations for stylists, a manicure/pedicure station, and several shampoo bowls. The professional team of twenty-four include seventeen service providers, fifteen of whom are booth renters, and two who work on commission. Two part-time estheticians provide facials, peels, hair removal, and light aesthetic spa services. Four front desk staff, including one long-tenured manager, take care of day-to-day operations with little oversight necessary from the owner.
This successful business has an excellent reputation and can build upon their popularity by continuing social media engagement, utilizing targeted advertising, or building ancillary services.
- Year Established: 1982
- Location: South of Denver, Tech Center Area
- Services: Salon: cuts, color, highlights, perms, esthetics and hair removal, nails, retail sales
- Clients: Primarily local female clientele (70%), men (20%), children (10%)
- Lease: 2,600 sq. ft.: 17 custom designed stations, nail station and pedicure station, esthetics room, reception area, retail floor, waiting area
- Reason for Selling: Exit strategy
- Staff: 24: Manager, 17 service providers/stylists (15 booth rentals), 2 part-time estheticians, 4 front desk staff
- Seller Training Period: 90 days
- Growth Opportunities: Continue engagement on social media, targeted advertising, explore franchise opportunities
- Current Owners Responsibilities: Oversight only
- List Price: $463,000
- Gross Sales:
- 2018: $605,917
- Cash Flow:
- 2018: $140,423
- Assets Included in Purchase*
- Equipment: $71,000: Furniture, stations, esthetics studio, pedi chair, sign, equipment, security system, table, steamer, mag lamp, towel warmer, wet bar, wax equipment, DiamondTome, wall art, furniture
- Inventory: $40,000: Hair color, hair care products and professional supplies, retail products for sale
- Intangible Assets: Popular salon with loyal client base, long-tenured employees with up-to-date training, great social media reviews
*amounts may vary, assets may be depreciated, replacement cost, or fair market value
Cash Flow Analysis
|Description of Financial Statement||P&L Statement||Tax Return||Tax Return||Tax Return||Notes|
|Net Income Shown on Financial Statement||$1,837||$8,429||$60,508||$41,482|
|Compensation to Owner||$100,000||$112,760||$117,244||$96,500|
|11% Tax on total W2 Salaries||$11,000||$12,404||$12,897||$10,615|
|Meals & Entertainment||$0||$0||$1,561||$132|
|Subscriptions and Dues||$216||$1,190||$687||$624|
|Seller's Cash Flow = Total Addbacks + Net Income||$118,669||$140,423||$195,262||$165,540|
|Profit Margin||31.52 %||23.18 %||31.03 %||23.94 %|
- Profit margin 2018: 23%
- Sales have decreased over the past couple of years due to the owner pulling back from working in the salon as a stylist as well as the transition to a booth renting model.
- Hair removal
- Retail sales
Total Staff: 24
- 17 Service providers/stylists
- 15 Booth rental stylists
- 2 Stylists earning commission
- 2 Part-time estheticians
- Continue engagement on social media
- Targeted advertising
- Explore franchise opportunities
The Firm used a cash flow valuation methodology to determine the purchase price of the business.
The formula used is as follows:
Cash Flow x Prescribed Multiple = Fair Market Value
Cash flow is the sum of business net income plus any owner perks and any non-onward going expenses.
A prescribed multiple is determined by a 20 question, 100-point parameter ranking system that is used to analyze the current business health. Each question is based on a scale from 1 to 5: 1 being low, 2 below average, 3 average, 4 above average, 5 high. The average of the responses sum is the business’ prescribed multiplier.
For this business, a 2018 cash flow was used with a prescribed multiple is 3.3. With this information, the computation is as follows:
$140,423 x 3.3 = $463,396
The fair market value found above positions the business list price at $463,000.
Purchase Price: $463,000
15% Buyer Down Payment: $69,450
15% Seller Financing: $69,450
70% Bank Loan: $324,100
Seller financing 5-year term at a rate of 4.50% equals a monthly loan payment of $1,295.
Bank loan 8-year term at a rate of 6% equals a monthly loan payment of $4,259.
After business expenses and loan payments, a buyer with a 15% down payment of $69,450 would retain a profit of $73,353, which results in a 106% return on investment in the first year.
A lender is required to have a minimum 1.5 coverage ratio for any business loans extended. At a proposed purchase price of $463,000 with the terms listed above, the coverage ratio is 2.1.
Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
*The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.
Offer Price: $
% Buyer Cash Down at Closing: $
% Seller Carry Back via Promissory Note: $
year term at a rate of %
% of Purchase Price secured by Buyer and Seller
Total Bank Loan Need: $
% of Purchase Price
Desired Loan Type:
Desired Bank Terms: year term at a rate of %
Total Business Assets, Inventory, and A/R: $
Total Undercollateralized Loan: $
|Monthly Payment to Bank:||$|
|Yearly Payment to Bank:||$|
|Monthly Payment to Seller:||$|
|Yearly Payment to Seller:||$|
|Total Monthly Debt Service:||$|
|Total Yearly Debt Service:||$|
Fixed Charge Coverage Ratio
The bank will require a minimum ratio of 1.5 to be lendable.
2018 Cash Flow
|Annual Debt Service:||$|
Buyer's Net Operating Income (NOI)
The amount of money the Buyer will retain as profit.
2018 Cash Flow
|Annual Debt Service:||-$|
Buyer's Return on Investment (ROI)
The rate of return on the Buyer's down payment.
|Document Title / Description|
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